Is my worker an employee or an independent contractor?

In 2022, two significant High Court decisions confirmed the primacy of the contract in determining employee vs independent contractor relationships. Since these decisions were handed down, the starting point for assessing the nature of the relationship has been the terms of the written agreement (unless of course, the written agreement is deemed to be a sham). How the parties describe the relationship rarely impacts its ‘true legal character’. However, the parties’ express rights and obligations (set out in the written agreement) will indicate the parties’ intentions in respect to the engagement.

Despite these High Court decisions, the Fair Work Legislation Amendment (Closing Loopholes No. 2) Bill 2023 (Bill) was recently passed by both houses of parliament. The Bill inserts a new definition of employee and employer into the Fair Work Act 2009 (Cth). Under the new definitions, the meaning of ’employee’ and ’employer’ is to be determined by ‘ascertaining the real substance, practical reality and true nature of the relationship’ between the parties. Effectively, this overrides and replaces the High Court Decisions, as the totality and true nature of the relationship between the parties must be considered. Accordingly, on and from 26 August 2024 the Courts will now consider:

1. the terms of the written agreement; and
2. how the written agreement is performed/what the nature of the relationship between the parties actually is.

As part of the Court’s review, there are key indicia it will consider to determine whether the worker is an employee or independent contractor. To ensure the written agreement and the performance of the agreement reflect the parties’ intentions, we recommend businesses consider:

1. the business’ control of the worker;
2. the integration of the worker;
3. the worker’s remuneration;
4. the worker’s ability to subcontract or delegate;
5. the provision of tools and equipment to the worker;
6. which party bears the risk; and
7. which party benefits from the goodwill that arises from the work.

If your business has questions about this change, please contact our business team at 3224 0265.